Tale of Two Cities – Part VI

In this VIth edition of the Tale of Two Cities, Cambre and Newington examine the UK Government’s approach to Brexit negotiations and its reception in Brussels.

Brexit Task Force

The view from London

The “Government by the people” rhetoric

Any card player knows the importance of keeping your cards close to your chest, and the British Government is no exception in the lead up to the UK-EU negotiations. These negotiations are, after all, going to turn into one very high-stakes game of poker. The reluctance on the part of the UK Government over the last few months to set out any detail about its negotiating terms has led to frenzied rumour and conjecture – last week’s snapped hand-written note by a Conservative aide referring to an apparent ‘have cake and eat it’ strategy is just one example of how the press is seizing on the merest slither of information.

What is clear at this stage of the process is that the Government feels the need to demonstrate that it has taken on-board Brexit voter rhetoric, and as such, Theresa May this week moved on from the mantra of ‘Brexit means Brexit’ to saying that her Government would be negotiating for a ‘red, white and blue Brexit’. She refrained from providing any more detail, but the growing assumption is that the UK will seek an arrangement in which it gives up its membership of the Single Market but maintains access to parts of the trading bloc in a way similar to Canada, and controls immigration.

Revealing the UK’s priorities

The UK Government insists that it would be foolish to reveal its hand when ministers and officials will face well-practiced EU negotiators, but the Opposition has called for more detail. In the face of a possible rebellion by up to 40 backbenchers, and with a working majority cut to 12 following the by-election in Richmond which went to the anti-Brexit Lib Dems, Mrs May has now agreed to publish a ‘plan’ before triggering Article 50. The level of detail in the plan, however, is yet to be confirmed. Meanwhile, the Government is appealing the High Court’s ruling last month that it must allow Parliament to vote before triggering Article 50. The Supreme Court is expected to rule in the New Year and if, as expected, it agrees with the High Court, the Government will be forced to move quickly in introducing and passing a Bill before the deadline the Prime Minister has set to press ‘go’ on Article 50 falls at the end of March 2017.

Michel Barnier, the European Commission’s lead representative, has indicated that Article 50 negotiations would be conducted in three phases, and that the EU will be pushing for agreement on the UK’s exit in 15-18 months, leaving four to five months for ratification. The UK, however, is keen for a new trade deal to be agreed with the EU before handing in its membership.

To overcome the looming prospect of a ‘cliff edge’, the Prime Minister told the Confederation of British Industries last week that the Government would consider a ‘transitional’ deal if required which could see the UK continuing to pay contributions to the EU after Brexit. However, numerous MPs, who believe that they have a mandate for “hard Brexit” have criticised such measures and are working to make sure that the transitional period if implemented at all, is time limited.

What do we know?

With rumours circulating that the Government is on course for a sector-by-sector negotiation of single market and trade access, and with MPs from the Exiting the EU Select Committee suggesting it is inevitable that the UK leave the Single Market and Customs Union (a view reinforced by Sir Oliver Letwin MP in an interview with the BBC on Tuesday), it is important that industry understands what is at stake and can express its positions convincingly.

If the rumours are true, the Government is looking to prioritise sectors and industry winners (evidenced by the Nissan trade deal) in negotiations, cherry-picked for their impact on clusters of existing jobs and potential areas of growth. The implications of taking this strategy would be vast. The publication this week of a Centre for Economic and Business Research (CEBR) report into the importance of the main sectors of the UK economy shows that most, if not all, sectors are linked to the EU in one way or another. As such, any sector-by-sector approach would have to be extremely comprehensive or else entire swathes of the business community that are not covered in negotiations could suffer.

Deloitte’s leaked assessment of the Brexit process has suggested that the UK needs to mobilise 30,000 extra civil servants to deal with the momentous task of implementing the 500 Brexit projects associated with separation.

The view from Brussels

In Brussels, the UK’s stance of either “keeping its cards close to its chest” or simply not agreeing on a cohesive plan, is viewed with increasing impatience. Tusk’s curt response to British MPs – saying their demands for guarantees for UK citizens had “nothing to do with reality” – was symptomatic of this feeling that the UK – even in Brexit – is not willing to understand and abide by the rules of the club.

Visiting the European Parliament in Strasbourg, David Davis was directly rebuked by MEPs for failing to understand the EP’s role, meet the right people or present any plan. Manfred Weber, leader of the EPP – the biggest parliamentary group – said after his meeting with Davis: “I haven’t heard anything new, of how the British government wants to tackle it (Brexit). In the coming weeks we will have to look at a much clearer negotiating process, we need a clear position from the British government.”

The EU’s position on the big issues, as Barnier stated in his first press conference as Brexit negotiator, remains clear: the four freedoms are inseparable; there will be no talks before the triggering of Article 50; there will be no post-Brexit deal until the terms of Brexit are agreed upon.

The primary reaction from EU stakeholders to the UK Government’s statements as well as the plethora of voices from across the Channel has been indifference – or worse, a hardening of attitudes. Although there are voices sympathetic to the UK – notably from Ireland and Poland with the former concerned about the impact on trade and the latter about their citizens in the UK and maintaining a united front against Russia – hard-line voices continue to prevail. Slovak Prime Minister Fico, holding the Council Presidency, stated that negotiations will be painful, and Maltese Premier Muscat, incoming head of the Council, echoed him saying the UK needs to consider being out of the single market as a serious threat. Italian Trade Minister Calenda lamented that the UK is fuelling chaos by playing around.

On 15 December, EU leaders will once again hold an “informal” gathering ahead of the European Council to which PM May is not invited.

A tightening timeline

For the EU, a priority is also to ensure the UK leaves the EU before the 2019 elections, and to allow enough time for the European Parliament to approve the withdrawal terms, which leaves roughly 15-18 months for negotiations. For both parties therefore, agreeing on a transition period and whatever lies ahead is critical.

The EU for this reason is pressing the UK to define its stance and trigger Article 50 as soon as possible. Other hurdles may however appear. The UK Supreme Court may ask the ECJ for an Opinion on whether triggering Article 50 is an irrevocable act (as deemed by the High Court, in contradiction to the view of the European Parliament). Such a process could delay the start of negotiations for months. This adds to concerns that the UK’s withdrawal agreement may need to be ratified by the 38 parliaments across the EU – which would likely lead to interminable delays and prolonged uncertainty.

Looking on the bright side

Uncertainty and contagion continue to prey on the minds of European leaders when they consider Brexit. However, there is a positive side. At the December European Council, leaders will discuss boosting EU defence and security coordination. Talks of a more dynamic and flexible EU are also in full swing. The EU institutions continue to negotiate the balance of power between the EU level and the member states. The European Council should set the negotiating framework and the interests of the 27, with the Commission at disposal for technical expertise. What the EU will look like after the UK leaves remains to be seen. The shock of Brexit has however shaken things up, at all levels. The German Bertelsmann Stiftung published an EU survey, which showed that, following the Brexit vote, people in five of the six largest EU member states, including Britain, have a better understanding of the EU and are more supportive of the EU project. That, at least, is good news.